Governor McDonnell presented his 2012-2014 biennial budget on Monday, December 19, 2011, before a joint session of the Senate Finance, the House Appropriations, and the House Finance committees. This budget will be considered by the 2012 Session of the General Assembly, which is scheduled to convene on January 11, 2012. The Governor’s introduced budget for the 2012-2014 biennium covers fiscal year 2013 (which begins July 1, 2012, and ends June 30, 2013) and fiscal year 2014 (which begins July 1, 2013, and ends June 30, 2014). The introduced budget bill containing Governor McDonnell’s budget recommendations for the 2012-2014 biennium is House Bill/Senate Bill 30.

The recommendations made by Governor McDonnell regarding the Direct Aid to Public Education budget include increased state funding for technical updates to the Standards of Quality (SOQ), incentive, categorical, supplemental education, and Lottery-funded accounts as part of the biennial rebenchmarking process, as well as specific policy changes outlined in Attachment A. Overall, total state funding for public education in the 2012-2014 biennium is proposed to increase by $438.2 million over the fiscal year 2012 base.

Attachment A to this memorandum provides a summary of the changes proposed by the Governor for the 2012-2014 Direct Aid budget. Key recommendations in Governor McDonnell’s 2012-2014 introduced budget impacting public education funding include:

technical updates to continue and revise the SOQ, incentive, categorical, and Lottery-funded programs for the most recent funded salary amounts, prevailing support costs, enrollment projections, and other data updates;

new composite indices for the 2012-2014 biennium;

new sales tax and Lottery revenue estimates;

revisions to the employer rates for fringe benefit contributions paid to the Virginia Retirement System (VRS);

removal of funding for non-personal inflation;

removal of funding for the Cost of Competing Adjustment for support positions;

includes a portion of the American Recovery and Reinvestment Act (ARRA) State Fiscal Stabilization Fund (SFSF) revenues from fiscal year 2010 in calculating the SOQ federal revenue deduct for the 2012-2014 biennium; and

new program initiatives proposed by the Governor.

A summary of proposed new funding in the Department of Education Central Office budget affecting school divisions is also included in Attachment A.

Attachment B to this memorandum lists the projected state payments for each school division for the SOQ, incentive, categorical, and Lottery-funded accounts for fiscal years 2013 and 2014 based on the Governor’s introduced 2012-2014 budget. The projected state payments shown in Attachment B are based on the Department of Education’s latest projections of March 31 average daily membership (ADM) for fiscal years 2013 and 2014 and cannot be modified. The estimated state payments shown in Attachment B do not include the supplemental education grants authorized by the General Assembly that are unique to certain school divisions. Several of the categorical account state payments shown in Attachment B are funded on a reimbursement basis and represent the Department’s latest projected state payments; however, final payments for these accounts in fiscal years 2013 and 2014 will be based on actual, eligible reimbursement requests submitted by school divisions and approved by the Department.

In addition to the estimated state payments information contained in Attachment B, a downloadable Excel file has been created to assist school divisions in calculating projected state payments and required local matches in fiscal years 2013 and 2014 for most Direct Aid programs. This file gives divisions the opportunity to change ADM to test the effect on projected state funding and projected local match requirements using the Department’s projected ADM or a local projection of ADM. (Attachment B contains projected state payment information for each school division in .pdf format based on the Department’s projected ADM only and cannot be modified.)

Although we have confidence in the accuracy of our ADM projections on a statewide basis, experience has shown that the accuracy of our projections for individual divisions may vary. When divisions believe that they have more accurate projections of their March 31 ADM, they are encouraged to substitute their estimates for those provided in this memorandum when using the Excel calculation file. Please note that changing the ADM value in the Excel file only changes the estimated funding for accounts that are funded on the basis of ADM. The estimated funding for all other accounts is unaffected by changing ADM in the Excel file and, therefore, remains the same.

Also note that sales tax estimates in the Excel calculation file are revenue projections only. Actual sales tax payments made to school divisions in fiscal years 2013 and 2014 on a semi-monthly basis will be based on actual sales tax receipts. However, pursuant to the appropriation act, the Basic Aid entitlement calculation is based on the estimated sales tax appropriation only and is not adjusted for actual sales tax revenues received.

Attachment C to this memorandum provides detailed instructions for accessing the Excel calculation file from the Department of Education Web site. The Excel file may be downloaded from the following Web address:

Information on data inputs updated for the 2012-2014 biennium such as funded salary amounts is available in the Board of Education rebenchmarking presentation from July 2011 (Attachment D).

It is important to remember that the information provided in Attachment B and in the Excel calculation file relates to the Governor’s 2012-2014 biennial budget as introduced. The House of Delegates and the Senate will have the opportunity to amend the Governor’s budget proposals during the 2012 General Assembly session. The General Assembly will adopt a final 2012-2014 biennial budget before the end of the 2012 session, which is scheduled for March 10, 2012; therefore, the projected state payments contained in Attachment B and in the Excel calculation file are projections only and are subject to change as a result of legislative action by the 2012 General Assembly.

The Department will provide additional information during the General Assembly session as changes to the estimated Direct Aid state payments occur. After the conclusion of the session, projected state payments based on final General Assembly actions will be sent to you in another Superintendent’s Memorandum. Please note, the actual fiscal year 2013 and fiscal year 2014 state payments will be made on the basis of final costs computed using actual March 31 ADM and other final program participation information that applies to each fiscal year and each program.

If you have questions or need additional information concerning the Governor’s introduced budget for the 2012-2014 biennium and projected Direct Aid state payments for fiscal years 2013 and 2014, please contact Kent Dickey, deputy superintendent for finance and operations, or budget office staff at (804) 225-2025 or by e-mail (e-mail addresses available at http://doe.virginiainteractive.org/vdoe_directories/StaffByDivisions.aspx?a=Finance&w=true).